Abstract
Abstract The United States tax system allows taxpayers to deduct local taxes from their taxable incomes. Using school district referendum results, we employ a continuous treatment two-way fixed-effects framework to provide causal evidence of a positive relation between the demand for local public goods and the share of residents deducting local taxes. We find that a one-percentage-point decrease in the share of residents deducting property taxes reduces tax and bond referendum approval rates by approximately 0.97 percentage points. Because these federal tax deductions disproportionately benefit higher-income individuals, they potentially widen disparities in public service provision across jurisdictions.
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